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Saturday, July 07, 2007

Is correction on cards?

After a few hiccups earlier this week, the Bombay Stock Exchange’s 30-share Sensex made its way past the psychological 15,000 mark on Friday. Despite negative cues from Asia and Europe, bulls romped ahead to end the week at all-time highs.

Friday, Bombay Stock Exchange’s Sensex closed at 14,964, up 102 points or 0.69% after making a new intra-day high of 15,007.22.

National Stock Exchange's Nifty ended at 4385, up 0.71% or 31 points, touching a fresh of 4411 earlier.

As India Inc gears up for the earnings season, which kicks off next week, how are markets poised from hereon?

“With the Sensex at 15000 and Nifty at 4400, we are treading the danger zone. Profit booking may emerge at these levels as people have been waiting for these psychological levels so that they make an exit,” said Hitesh Sheth, head-technical research, Prabhudas Lilladher.

Sheth warns that market is headed for a correction. “The Nifty may fall to 4250-4300 while the Sensex may see a 500-point dip to 14500 levels,” he said.

DD Sharma, senior vice president at AnandRathi Securities said, “the market has achieved what it wanted to. Considering a near-term horizon of around two months, the market is expected to consolidate. In fact, the upside is limited.”

Sharma expects select under priced stocks to outperform the indices. In his view, in the banking space, Oriental Bank of Commerce, Canara Bank and Punjab National Bank are likely to witness an upside.

Among the construction stocks, he finds Hindustan Constructions, Nagarjuna Constructions, and Gammon India attractive.

IT bellwether Infosys Technologies will kick off the earnings season Wednesday.

Friday, IT stocks moved up and the pullback in this sector is expected to continue ahead of the results.

“Technology stocks have underperformed the market in the last few months. They made no contribution to recent rally because of the rupee appreciation against dollar. Ahead of results, heavyweights in the space are likely to see an upside,” said DD Sharma.

However, an analyst from a local brokerage said, “the IT sector is likely to remain lacklustre until Infosys results are out. Market would be looking at the impact of rupee appreciation.”

He added that the IT companies are not likely to announce disappointing figures. “These companies have got good hedging strategies which can cap losses. If the rupee appreciation is compensated by higher volume growth, then the impact would not be much.”

Bulls likely to retain their hold

The markets saw hectic buying at lower levels as the advocated support yesterday at 4300-4310 band saw buying by strong hands. The bear squeeze helped matters as the buying continued till the end of the session.

The market breadth was positive as the BSE & NSE combined advance decline ratio stood at 2074 : 1559, whereas the capitalisation of the same stood at Rs 11692 crore : Rs 6009 crore.

The derivatives data for the previous session indicate a mild decline in the open interest as profit sales were witnessed at higher levels.

The indices have closed at the upper end of the intraday range and the market breadth and traded volumes have been higher. Coming on a weekend session, these are signs of optimism as the indices have scaled new highs on an intraday basis.

The 4300 level is now an established floor for the near term traders and the coming session is likely to witness an intraday range of 4451 on advances and 4319 on declines.

The wide range is owing to the higher intraday volatility in the recent sessions and the swing charts are pointing towards wider intraday ranges in the near term.

The outlook for Monday is that of continued optimism and should the overseas cues remain positive, the bulls are likely to retail their hold on the sentiments.

FIIs drive rally, Sensex hits 15K

The Bombay Stock Exchange (BSE) benchmark index, Sensex, crossed the 15,000-mark for the first time bolstered by sustained FII inflows.

Both the key market indices - Sensex and Nifty - hit all-time intra-trade highs and ended the week at new closing peaks on the back of expectations of robust first quarter earnings and easing concerns about a rate hike.

The Sensex touched a new trading high of 15,007.22 before ending the week at 14,964.12, a net rise of 313.61 points (2.14%) over the last weekend close of 14,650.51.

The broader S&P CNX Nifty of the National Stock Exchange (NSE) hit a life-time trading peak of 4,411.00, and closed the week at 4,384.85, netting a hefty gain of 66.55 points (1.54%) over the last weekend close of 4,318.30.

The market discounted a small rise in inflation, which rose to 4.13% in the week ended June 23 from 4.03% in the preceding week - well below the central bank's tolerance level.

FIIs have invested $6.4 billion so far in the current calendar year as against $7.9 billion in 2006. Inflows amounted to Rs 9,089 crore (including provisional numbers for July 6) in six days between June 29 and July 6.

Earnings Strength Comparison - Q4FY07

Earnings Strength Comparison - Q4FY07

Dalal Street on a nostalgia trip

Jeetendra Martak, a 55-year old Bombay Stock Exchange broker, ordered tea for his broker friends to celebrate Sensex hitting the 15,000 mark.

“In early 1980s, when Sensex was around 400, I went to a seminar where an economist predicted that it would go up to 1,000 in next three to four years,” he recalls. “We laughed him off. But Sensex did reach that level in a matter of few years. It’s an amazing feeling to see the Sensex at 15,000 because, unlike in the past, it’s no longer an operator-driven market.”

As the 133-year old exchange’s benchmark index touched a new milestone, the old-time brokers had a feeling of nostalgia. After the electronic system was introduced in 1995, brokers no longer have to meet each other in the trading ring or the hall.
“It’s a great feeling to see that our stock markets have reached such a high level,” recalls Vidyut Devendra Kumar, a BSE broker who inherited his father’s broking business in 1975. “But the old world charm was different. If there was a news of stock price going up, we could see the happiness on each other’s face as we were in the same trading hall. Whether it was a jobber, sub-broker or a broker, everyone would enjoy the lunch together. Now, I don’t know who’s buying my shares or from whom I am buying.”

Under the earlier system, trading was restricted to two hours: 12-2pm. The prices of stocks were updated every half an hour and were displayed on a board.
There was also a live commentary of the market for the trading ring, done by aRashik Bhai.

This has now been replaced by live commentary on business channels and the internet, where one can see prices in real time.

Jasvant Parekh, a broker who has been trading even before the birth of Sensex in 1978-79, recalls how making Rs2,000 a day in the trading ring gave a great sense of pride to the broking community. “Today people make Rs5 lakh a day and that’s quite normal,” he says.

He says he is a bit surprised by the Sensex level. “It was only by word of mouth we used to get an idea about who is buying and who is selling a particular scrip,” says Parekh. “Or people used to blindly follow whatever Harshad Mehta used to say,” referring to the broker who ended up being blamed for India’s biggest stock market scam.

“Nobody could have thought that Sensex will go up to 15,000,” says Madhukar Sheth, a 58-year-old broker. “I have made a lot of money since I entered the business in 1975 but, had the market moved this way during our time, I would have made money faster and splurged the way the youngsters do today.”

When you’re building in a new India

Sanjay Chandra wants to meet at The Oberoi’s Belvedere, the private business club that reminds me of umpteen sessions with bankers and industrialists spent prodding for what’s happening in corporate India. Not what I’d call relaxing. I was hoping Chandra, a Delhiite, would pick an undiscovered watering hole that a 35-year-old like him ought to frequent, so I could rediscover the hip bits of the city that have passed me by in the decade that I have been away.

“You sure, it’s your favourite watering hole, where you go for the odd tipple?” I ask over the phone.

“Hmm... I don’t drink,” he responds, instantly shattering a somewhat stereotypical power-broking-over-drinks image.

By the time I get to the Belvedere, Chandra is already there, waiting by the door. “How about 360 instead?” he asks, almost reading my mind and, no doubt, my expression. “Except, it’ll probably be full of people I know.”

We’ve barely walked into the lounge-cum-restaurant when an acquaintance waves and Chandra reaches out to shake hands. Another private equity fund looking for opportunity in India, no doubt.

Unitech Ltd, the company Chandra oversees as managing director, already has a string of international investors and counts the iconic George Soros as one of them.

And if you ask Chandra, he’ll tell you the list of overseas investors looking for real estate deals is long and weighty. With real estate prices zooming nearly 300% in

India’s top cities in just few years, it’s among the hottest destinations in the world for investors. But it hasn’t always been that way. Not for Unitech, at least.

The company’s origins go back to the early 1970s, when Chandra’s father, Ramesh
Chandra, fresh from a construction engineering course in the UK, joined a private firm upon his return. Finding that he had time and expertise on his hands, he started consulting on construction projects in his spare time. Business was good, so he formed a company called United Technical Consultants Pte Ltd, along with a group of partners.

By 1974, aided by funding from Ramesh Chandra’s wife’s (Sanjay’s mother) well-established gynaecology consultancy, the company decided to move on to the next step, construction contracts from companies—long before outsourcing became popular parlance in India. In a few years, the company had started doing projects overseas, coinciding with, and riding on, the wealth generation in Libyan and West

Asian economies that were swelling with money from the oil trade.
I interrupt Chandra’s story and remind him we should order drinks, and he picks a watermelon juice. I get a lemon juice while he goads me to move on to a wine. I’m almost tempted, but desist—Delhi’s heat and inefficient air conditioning at work have left me nursing a miserable headache. We order yakitori and halfway through munching, he turns back to his story.

In 1986, after more than a decade of construction work, Unitech sold shares to the public to raise about Rs3 crore and fund its expansion, somewhat setting it on the path to becoming among India’s top developers.

Chandra recalls growing up in the house that was his mother’s clinic and the family residence in the South Delhi neighbourhood of Mayfair Garden. The family still lives in the combined property made up of two adjoining houses.

“She’s in her 60s and she delivers 80 to 90 babies a month,” he says, barely able to mask the pride. “And at the same clinic.”

Chandra is quick to add that the family does not own any property aside from the home-cum-clinic unit he grew up in. I give him an incredulous look. The promoter of India’s second-largest listed real estate company has no homes besides the one he grew up in? “Impossible,” I counter. “We are building a farmhouse in Vasant Kunj and that’s where we will move in. That’s really it,” says Chandra. I’m slowly moving my head, as Indians do to indicate disbelief. “A hundred per cent of our assets are held by the company, not individuals,” he counters.

So, how early did Chandra get involved in business? Was he groomed for the role?
More surprises.

Married to Preeti, who now runs a chain of trendy womenswear called GFO or Girl Forever, the couple spent their early years in North America, sourcing garments for large department stores. That’s where they had their two children Trisha, 9, and Karan, 6.

In the 1990s, Unitech started to move from construction to owning and developing properties, and bought out some of the partners in the firm. That’s when Chandra decided to return, motivated partly by greater control in taking decisions.

“We had more focus,” he says.

That may have helped build Unitech into a developer with one of India’s largest land banks of more than 10,000 acres, but many feel its challenges are yet to come.

While his firm is among the oldest listed developers in the country, it has been upstaged in market capitalization by rival DLF Ltd, which concluded a Rs9,187 crore share sale last month. And, as more and more Indians purchase homes, it’s spawning an industry that is not just full of bold upstarts but also unscrupulous fly-by-night operators.

“We tell our employees to be as transparent as possible because we deal with customers, contractors, architects, bankers lawyers… the whole lot. So, never do anything which you have to hide from a partner or a stakeholder. Be in touch with reality.”

With customer expectations changing rapidly, Chandra says the biggest issue is to keep pace with their needs. “You can’t sit in an ivory tower and sell.” And with property ownership becoming expensive, it means downsizing apartments, making them more compact and user friendly. His biggest fear is overcommitment, or promising more than he can deliver. “You have to be very careful about keeping the quality there.”

So, what’s his management style?

I manage a lot by SMS—it’s an unobtrusive way to tell them what I have to.” Meetings at Chandra’s office in Gurgaon are unstructured and employees can walk in without having pencilled in time, for discussions. The Chandras are active in the planning phase of projects but once a deal is signed, they leave the execution to their managers.

The man doesn’t drink, doesn’t keep five homes to shuttle between. How does he unwind?

“I like spending time with my family. We keep weekends for our kids and we like taking a lot of holidays together,” he says. “No business on weekends.”
His biggest concern as a parent is to make sure the children don’t grow up complacent.

“My kids have probably made some 20 overseas trips, whereas I first went overseas to Libya where we were building things, at nine,” he says. But their ambitions are in

“My son wants to be a builder,” he says with a toss of the head and a happy grin. “Bob the builder, for now.”

Name: Sanjay Chandra
Born: 1972 (New Delhi)
Education: Bachelor of Business Administration from Boston University.
Work Profile: Founder president of Ikon Clothing Inc., New York, from 1996 to 2001. He joined Unitech Ltd as head of sales and marketing in August 2002, then became managing director of the company in 2005. He is on the board of Unitech Developers and Hotels Ltd and Unitech Amusement Parks Ltd, which is building the largest amusement parks in the country.
Interests: A foodie who loves to travel.

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